Dealer moves towards digger status

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 10 Oct 2012   Posted by admin

AMID slumping iron ore prices and slowing global demand, Gina Rinehart’s Hancock Prospecting has continued to develop its $9 billion Roy Hill project in WA’s Pilbara.
With completion of the harbour dredging at Port Hedland in May and construction underway at the mine site, the company is still targeting first ore production in late 2014.
Hancock Prospecting has secured financial backing from two Chinese steel companies that have agreed to purchase an undisclosed amount of ore from the mine.
At the recent 2012 Diggers and Dealers Mining Forum in Kalgoorlie, Ms Rinehart’s company collected the Dealer of the Year award for the Roy Hill project agreements it transacted earlier this year.
In March, Hancock Prospecting took the necessary step of selling 30 per cent of the project, 115km north of Newman in the Chichester Ranges, to a consortium of international iron ore producers and traders in exchange for $3.2 billion that will be used to fund the project’s ongoing development.
The consortium comprises South Korea’s POSCO steel company and Japan’s Marubeni Corporation, which each hold a 12.5 per cent stake in the project, plus South Korea’s STX Corporation and Taiwan’s China Steel Corporation, which each hold a 2.5 per cent interest.
As part of the agreement, each company will receive its share of 16.5mtpa of iron ore from Roy Hill. It has also been reported that two relatively unknown Chinese steelmakers have agreed to buy a small amount of the 55 million tonne annual production expected from the project.
Meanwhile, in late July, Hancock Prospecting posted photos on its website of the signing of two offtake agreements with Shougang Group, one of China’s largest steel companies, and Yaxin Steel.
Hancock Prospecting has retained the remaining 70 per cent stake in Roy Hill but hasn’t ruled out selling off more of the project to equity investors.
In receiving the Dealer of the Year award, Hancock Prospecting chief development officer John Klepec acknowledged that the project’s development had been “a long road with many challenges” but said the company was hopeful of collecting the Digger of the Year award in 2015, once Roy Hill began production.
“At the end of March, we concluded the delayed but essential equity arrangements for the development of Roy Hill and welcomed our joint venture partners to the Roy Hill project,” Mr Klepec said in his acceptance speech.
“There is still some opportunity for further equity investors, so don’t hesitate to approach us.”
Mr Klepec said that while it had not been easy to secure funding in the current climate, “Mrs Rinehart achieved this investment without any investment bank assistance, without Federal Government assistance, and despite the negativity of the [the mining tax], carbon tax and inner-city media”.
There are reports that Hancock Prospecting is seeking a further $7 billion in financing for the project: an amount it hopes to secure by the end of the year.
In other positive news for the company, Roy Hill received Australia’s first Enterprise Migration Agreement (EMA) in May this year, allowing Hancock Prospecting to hire 1715 overseas workers to help fill project’s about 8500 positions during the project’s construction.
Federal Immigration and Citizenship minister Chris Bowen said the EMA was an important step in helping to combat the critical skills shortage.
Mr Bowen said in a statement that while the Government’s main priority was to ensure jobs for Australian workers, there was a need for temporary workers to help keep the economy strong.
“With more than 8000 workers required during the construction phase of the Roy Hill project there simply aren’t enough people in the local workforce to get the job done,” he said.
Commenting on the announcement in an article she wrote for the July edition of Australian Resources and Investment magazine, Ms Rinehart said the agreement would “not only help business, but will help the nation”.
“The 1715 temporary skilled overseas workers for the remote, hot Pilbara are actually just a small fraction of the 100,000 such workers entering Australia each year,” Ms Rinehart wrote.
“Moreover, they give us the guaranteed labour we need for a project that will give jobs to 6700 Australians during construction, and to more than 1000 afterwards. “These are sustainable jobs that won’t exist unless we can get sufficient labour for construction and bank loans for debt finance; however, banks need to be assured before providing money that we can get sufficient labour.”
Roy Hill is set to become one of the largest mining projects in Australia. It currently has indicated and inferred reserves of more than 2.4 billion tonnes: enough to sustain operations for more than 20 years.
The Roy Hill tenements were granted to Hancock Prospecting in 1993, when the company was in financial difficulty and iron ore wasn’t highly valued.
Mr Klepic said Hancock Prospecting could not “maintain all the rental and exploration requirements”, and lost a significant portion of its original tenement holdings.
Prefeasibility and bankable feasibility studies confirmed the potential of the area and in 2010, Hancock Prospecting welcomed the buy-in of its first joint venture partners, POSCO and STX Corporation.
To date, more than $1 billion has been spent on the development of Roy Hill’s open pit which, along with new shipment and harbour facilities at Port Hedland and a 342km-long high-speed, heavy-haulage railway, comprises a processing plant, airport, accommodation village and remoteoperations centre (ROC).
In June, a first soil-turning ceremony was held to officially launch the start of construction of the new ROC at Perth International Airport. The ROC will act as the corporate headquarters for Roy Hill from December 2013.
Roy Hill’s processing plant will produce lump and fines product, and will be the largest single-feed processing plant in the Pilbara.
The plant’s three primary and secondary crushing stations will each convert 5000t of ore an hour into particles of less than 150mm wide, which will then be conveyed to a surge stockpile prior to being fed into the processing plant.
In July 2011, Hancock Prospecting received final primary approvals for Roy Hill after the WA Government granted a special railway licence (SRL) for the heavy haulage railway that will transport ore directly from the mine site to the purpose-built wharves at Port Hedland.
Clearing of the railway centreline has been completed and rail operations will consist of five, 232-wagon trains, each carrying 31,450t of ore per day. Roy Hill’s Port Hedland facilities will be constructed to receive, stockpile, screen and export 55mtpa of direct shipping iron ore, and will be designed to accommodate possible future expansions.
The harbour dredging, which was completed two months ahead of schedule, allows for two new deep-water shipping berths to be constructed at South West Creek.
The wharves were designed to accommodate an average ship size of 206,000t, but are capable of handling larger 320,000t cape-size vessels.

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